The Uncertain Future of Class Action Waivers in Broker-Dealer Contracts
By JOSHUA G. HAMILTON, JENIFER Q. DOAN, & BETH MUELLER
A decision by a Financial Industry Regulatory Authority (‘‘FINRA’’) panel allowing a broker-dealer to include in its form client agreements a provision requiring its clients to waive their right to bring class action lawsuits has caused a stir in the financial services industry. In the wake of this decision, a wide range of lawmakers, regulators, and consumer advocacy organizations have lobbied for a prohibition on mandatory arbitration agreements and class action waivers in consumer contracts such as those used by broker-dealers with their customers. Facing substantial pressure from these groups and uncertainty regarding the continued viability of class action waivers, some broker-dealers are voluntarily eliminating such provisions pending more guidance from the courts and regulators. In light of the uncertain future of class action waivers in broker-dealer agreements, this article will survey recent events concerning class action waivers and provide practical guidance for broker-dealers and their counsel on how to proceed in this unsettled landscape.